Mortgage insurance is great for helping you purchase your home, and with most mortgage insurance options, once you achieve a pre-determined equity level, your lender is required to cancel coverage—reducing your total monthly mortgage payment. Individuals who selected a borrower-paid single-premium product may be entitled to a refund of unearned premium rather than a mortgage payment reduction.
Under the Federal Homeowners Protection Act of 1998, for loans originated after July 29, 1999, coverage on your primary residence must be canceled once your balance is scheduled to drop to 78 percent of the original value of your property. Under this law, the cancellation occurs automatically—freeing up money that’s sure to come in handy every month.2
You may be able to cancel coverage even earlier—when your loan balance reaches 80 percent of the original value. Rules for borrower-requested cancellation can vary by state and may involve other considerations. So, if you think you may be eligible to cancel mortgage insurance, check with your mortgage servicer (the company you send your mortgage payments to) for details, including requirements for submitting a written request.
A more detailed guide for canceling private mortgage insurance can be found here. If you have questions or require further assistance, feel free to contact one of our home loan experts at (516) 408-7300.